Financial Sector

Overview

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CARE Ratings rates debt instruments/ bank facilities of a large number of companies in the financial sector, including banks, non-banking finance companies, housing finance companies, financial institutions etc.

Rating determination is a matter of experienced and holistic judgement, based on the relevant quantitative and qualitative factors affecting the credit quality of the issuer. The analytical framework of CARE Ratings' rating methodology is divided into two interdependent segments- The first deals with the operational characteristics and the second with the financial characteristics. Besides quantitative factors, qualitative aspects like an assessment of management capabilities play a very important role in arriving at the rating for an instrument. The relative importance of qualitative and quantitative components of the analysis varies with the type of issuer. CARE Ratings largely uses the ‘CRAMELS’ model to assess entities in the financial sector; essentially covering Capital adequacy, Resource raising ability, Asset quality, Management quality, Earnings quality, Liquidity and Systems. Apart from that, CARE Ratings factors in the nuances of the industry in which the financial sector entity operates.

CARE Ratings’ offerings for the financial sector include:

• Debt Instrument ratings
• Long-term instruments like
  • Bonds (Lower Tier II bonds under Basel II, Upper Tier II bonds under Basel II, Tier I – Innovative Perpetual Debt Instruments under Basel II, Tier II Bonds under Basel III, Tier I bonds under Basel III)
  • Non-Convertible Debentures (NCDs)
  • Principal Protected Market Linked Debentures
  • Subordinate Debt
  • Perpetual Bonds
  • Hybrid Instruments
  • Preference Shares
• Medium-term instruments like
  • Fixed Deposits (FDs)
• Short-term instruments like
  • Commercial Papers (CPs) and short-term debt programs of NBFCs
  • CDs of Banks
• Bank Loan ratings